The Moral Hazard Problem Is Minimized When Deposit Insurance Premiums

question 61

Multiple Choice

The moral hazard problem is minimized when deposit insurance premiums are

• A)zero (not imposed by the FDIC).
• B)the same percentage of assets for all banks.
• C)set at a fixed percentage of assets for large banks, and is zero for small banks.
• D)set at a percentage of assets that is based on the bank's risk level.

---

Definitions:

Useful Life

The estimated period during which an asset is expected to be usable for its intended purpose.

Operating Costs

Expenses associated with the day-to-day functioning of a business, including costs related to administration, sales, and production operations.

Service Hours

A measure of the amount of labor time or effort that is provided by a company as a service.

Percentage Change

A mathematical calculation that indicates the degree of change over time, expressed as a percentage.